Current Report Filing (8-k)

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT PURSUANT

TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

October 15, 2014

Date of Report (Date of earliest event reported)

UNITED SECURITY BANCSHARES

(Exact Name of Registrant as Specified in its Charter)

California

(State or Other Jurisdiction of Incorporation)



000-32987		91-2112732
(Commission File Number)		(I.R.S. Employer Identification No.)

2126 Inyo Street, Fresno, California		93721
(Address of principal executive offices)		(Zip Code)

559-248-4943

(Registrant's Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities

Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a12 under the Exchange

Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the

Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the

Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On October 15, 2014, United Security Bancshares issued a press release reporting its financial results for the quarter ended September 30, 2014. A copy of such press release is attached, and incorporated herein by reference as Exhibit 99.1

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

(d) Exhibits.

EXHIBIT #

99.1 Press release of United Security Bancshares dated October 15, 2014

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

United Security Bancshares

Date: October 15, 2014 By: /s/ Ken Donahue

-----------------------------------------------------------

Ken Donahue

Executive Vice President & Chief Financial Officer

United Security Bancshares -

Third Quarter Profits: $1.7 million

FRESNO, CA, October 15, 2014. United Security Bancshares (http://www.unitedsecuritybank.com/) (Nasdaq Global Select: UBFO) reported today unaudited consolidated net income of $4,659,000 or $0.31 per basic and diluted common share for the nine months ended September 30, 2014, as compared to $4,323,000 or $0.28 per basic and diluted shares for the nine months ended September 30, 2013. United Security Bancshares reported consolidated net income of $1,703,000 or $0.11 per basic and diluted common share for the quarter ended September 30, 2014, as compared to $1,852,000 or $0.12 per basic and diluted common shares for the quarter ended September 30, 2013.

Annualized return on average equity (ROAE) for the nine months ended September 30, 2014 was 7.90%, compared to 8.10% for the nine months ended September 30, 2013. Annualized return on average assets (ROAA) was 0.94% for the nine months ended September 30, 2014, compared to 0.90% for the nine months ended September 30, 2013. On a year to date comparative basis, changes in income were the result of an increase of $1,095,000 in non-interest income, an increase of $1,216,000 in total interest income, and a $265,000 decrease in interest expense, partially offset by a $1,019,000 increase in the provision for credit losses and an increase of $974,000 in non-interest expense.

Annualized return on average equity (ROAE) for the quarter ended September 30, 2014 was 8.39%, compared to 10.14% for the same period in 2013. Annualized return on average assets (ROAA) was 1% for the quarter ended September 30, 2014, compared to 1.14% for the same period in 2013. Change in net income on a quarter-to-quarter comparative basis between the third quarters of 2014 and 2013 is primarily the result of a negative provision for loan loss of $1,150,000 during 2013, compared to a provision of $39,000, partially offset by a $687,000 increase in interest income during the third quarter of 2014.

The Board of Directors of United Security Bancshares declared a third quarter 2014 stock dividend of one percent (1%) on September 23, 2014. The stock dividend was payable to shareholders of record on October 10, 2014, and the shares will be issued on October 22, 2014.

Dennis R. Woods, President and Chief Executive Officer of the Company, states, “We continue to see positive momentum with strong loan and deposit growth, increasing net earnings, and reductions in non-performing assets. We have grown our loan portfolio by over $50 million year to date and look forward to continued success during the fourth quarter of 2014.” Shareholders’ equity at September 30, 2014 was $81,295,000, up $4,752,000 from shareholders’ equity of $76,543,000 at December 31, 2013.

Net interest income before provision for credit losses for the nine months ended September 30, 2014 totaled $17,510,000, an increase of $1,481,000 from the $16,029,000 reported for the nine months ended September 30, 2013. The net interest margin was 4.01% for the nine months ended September 30, 2014, as compared to 3.90% for the nine months ended September 30, 2013. Net interest income before provision for credit losses for the quarter ended September 30, 2014 totaled $6,129,000, an increase of $702,000 from $5,427,000 reported for the quarter ended September 30, 2013. The net interest margin was 4.11% for the quarter ended September 30, 2014, as compared to 3.84% for the quarter ended September 30, 2013. The Company experienced an improvement in net interest margin due to an increase in the balance of high-yielding loans as a percentage of total earning assets.

Noninterest income for the nine months ended September 30, 2014 totaled $4,133,000, reflecting an increase of $1,095,000 from $3,038,000 in noninterest income reported for the nine months ended September 30, 2013. Customer service fees continue to provide the majority of the Company's noninterest income, totaling $2,639,000 and $2,554,000 for the nine months ended September 30, 2014 and 2013, respectively. On a year over year comparative basis, non-interest income increased primarily due to a decrease of $485,000 on loss on fair value option of financial assets and a $691,000 gain on the sale of investment during the nine months ended September 30, 2014. Noninterest income for the quarter ended September 30, 2014 totaled $1,311,000, reflecting a decrease of $102,000 from $1,413,000 in noninterest income reported for the quarter ended September 30, 2013. Customer service fees totaled $957,000 for the quarter ended September 30, 2014, as compared to $873,000 for the quarter ended September 30, 2013. Changes in noninterest income on a quarter-to-quarter comparative basis between the third quarters of 2014 and 2013 are largely the result of a $46,000 reduction in gain on fair value option of financial assets during the quarter ended September 30, 2014.

For the nine months ended September 30, 2014, noninterest expense totaled $14,155,000, an increase of $974,000 as compared to $13,181,000 for the nine months ended September 30, 2013. On a year over year comparative basis, noninterest expense increased primarily due to a $480,000 net cost on OREO during the nine months ended September 30, 2014, compared to a net gain on OREO of $1,036,000 for the same period ended September 30, 2013. Partially offsetting the increase due to net cost on OREO were reductions in professional fees, correspondent bank service charges, and regulatory assessments. Noninterest expense totaled $4,617,000 for the quarter ended September 30, 2014, a decrease of $337,000 as compared to $4,954,000 reported for the quarter ended September 30, 2013. Noninterest expenses fell during the third quarters of 2014 and 2013 primarily as a result of decreases in loss on tax credit partnership, net cost of OREO, and regulatory assessments of $148,000, $66,000, and $106,000, respectively.

The Company had a negative provision for loan loss of $101,000 for the nine months ended September 30, 2014, compared to a negative provision of $1,120,000 for the nine months ended September 30, 2013. Net loan recoveries totaled $228,000 for the nine months ended September 30, 2014, as compared to net charge-offs of $112,000 for the nine months ended September 30, 2013. The Company had a provision for loan loss of $39,000 for the quarter ended September 30, 2014, compared to a negative provision of $1,150,000 for the quarter ended September 30, 2013. Net loan recoveries totaled $27,000 for the quarter ended September 30, 2014, as compared to net loan recoveries of $545,000 for the quarter ended September 30, 2013. With a modest recovery in the economy and real estate markets within the Bank's service area, the Company has maintained an adequate allowance for loan losses which totaled 2.48% of total loans at September 30, 2014, compared to 2.78% of total loans at December 31, 2013. In determining the adequacy of the allowance for loan losses, Management's judgment is the primary determining factor for establishing the amount of the provision for loan losses and management considers the allowance for loan and lease losses at September 30, 2014 to be adequate.

Non-performing assets, comprised of nonaccrual loans, troubled debt restructures (TDR), other real estate owned through foreclosure (OREO), and loans more than 90 days past due and still accruing interest, decreased approximately $3,437,000 between December 31, 2013 and September 30, 2014. Additionally, nonperforming assets as a percentage of total assets decreased from 5.04% at December 31, 2013 to 4.14% at September 30, 2014. Nonaccrual loans decreased $2,586,000 between December 31, 2013 and September 30, 2014, while OREO increased $397,000 during the same period. Impaired loans totaled $14,369,000 at September 30, 2014, a decrease of $3,763,000 from the balance of $18,132,000 at December 31, 2013.

United Security Bancshares is a $680+ million bank holding company headquartered in Fresno, California. United Security Bank, its principal subsidiary, is a California state chartered bank with 11 branches serving the Central Valley and Campbell, and is a member of the Federal Reserve Bank of San Francisco.

FORWARD-LOOKING STATEMENTS

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended and the Company intends such statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on management’s knowledge and belief as of today and include information concerning the Company’s possible or assumed future financial condition, and its results of operations, business and earnings outlook. These forward-looking statements are subject to risks and uncertainties. A number of factors, some of which are beyond the Company’s ability to control or predict, could cause future results to differ materially from those contemplated by such forward-looking statements. These factors include (1) changes in interest rates, (2) significant changes in banking laws or regulations, (3) increased competition in the company’s market, (4) other-than-expected credit losses, (5) earthquake or other natural disasters impacting the condition of real estate collateral, (6) the effect of acquisitions and integration of acquired businesses, (7) the impact of proposed and/or recently adopted changes in laws, and regulations on the Company and its business; (8) changing bank regulatory conditions, policies, whether arising as new legislation or regulatory initiatives or changes in our regulatory classifications, that could lead to restrictions on activities of banks generally or as to the Bank, including specifically the formal order between the Federal Reserve Bank of San Francisco and the Company and the Bank, (9) failure to comply with the written regulatory agreement under which the Company is subject and (10) unknown economic impacts caused by the State of California’s budget issues, including the effect on Federal spending do to sequestration required by the Budget Control Act of 2011. Management cannot predict at this time the severity or duration of the effects of the recent business slowdown on the Company's specific business activities and profitability. Weaker or a further decline in capital and consumer spending, and related recessionary trends could adversely affect the Company's performance in a number of ways including decreased demand for our products and services and increased credit losses. Likewise, changes in interest rates, among other things, could slow the rate of growth or put pressure on current deposit levels and affect the ability of borrowers to repay loans. Forward-looking statements speak only as of the date they are made, and the Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the statements are made, or to update earnings guidance including the factors that influence earnings. For a more complete discussion of these risks and uncertainties, see the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, and particularly the section of Management’s Discussion and Analysis. Readers should carefully review all disclosures the Company files from time to time with the Securities and Exchange Commission ("SEC").



United Security Bancshares
Consolidated Balance Sheets (unaudited)
(in thousands)
	September 30, 2014			December 31, 2013
Assets
Cash and noninterest-bearing deposits in other banks	$	19,039		$	20,193
Cash and due from Federal Reserve Bank	115,846			115,019
Cash and cash equivalents	134,885			135,212
Interest-bearing deposits in other banks	1,520			1,515
Investment securities (AFS at market value)	49,624			43,616
Loans and leases, net of unearned fees	447,011			395,013
Less: Allowance for credit losses	(11,115		)	(10,988		)
Net loans	435,896			384,025
Premises and equipment - net	11,764			12,122
Other real estate owned	14,343			13,946
Goodwill and intangible assets	4,488			4,550
Cash surrender value of life insurance	17,587			17,203
Deferred income taxes	11,660			11,630
Other assets	8,627			12,110
Total assets	$	690,394		$	635,929
Deposits:
Noninterest bearing demand deposits	$	241,863		$	214,317
Money market, NOW, and savings	272,504			244,686
Time	76,580			83,486
Total deposits	590,947			542,489
Accrued interest payable	42			44
Other liabilities	8,063			5,728
Junior subordinated debentures (at fair value)	10,047			11,125
Total liabilities	609,099			559,386
Shareholders' equity:

Common stock, no par value 20,000,000 shares authorized, 15,272,382 issued and outstanding at September 30, 2014, and 14,799,888 at December 31, 2013	48,420			45,778
Retained earnings	33,019			30,884
Accumulated other comprehensive loss	(144)			(119)
Total shareholders' equity	81,295			76,543
Total liabilities and shareholders' equity	$	690,394		$	635,929



United Security Bancshares
Consolidated Statements of Income (unaudited)
(in thousands)
	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Interest income:
Interest and fees on loans	$	6,187	$	5,545	$	17,602	$	16,565
Interest on investment securities	227		157		688		495
Interest on deposits in FRB	63		88		210		223
Interest on deposits in other banks	2		2		5		6
Total interest income	6,479		5,792		18,505		17,289
Interest expense:
Interest on deposits	291		301		812		1,043
Interest on other borrowed funds	59		64		183		217
Total interest expense	350		365		995		1,260
Net interest income before provision for credit losses	6,129		5,427		17,510		16,029
Provision for credit losses	39		(1,150)		(101)		(1,120)
Net interest income	6,090		6,577		17,611		17,149
Non-interest income:
Customer service fees	957		873		2,639		2,554
Increase in cash surrender value of bank owned life insurance	129		140		384		417
Gain (loss) on Fair Value Option of Financial Assets	95		141		(34)		(519)
Gain on sale of other investment	—		—		691		—
Gain on sale of fixed assets	—		—		25		—
Other non-interest income	130		259		428		586
Total non-interest income	1,311		1,413		4,133		3,038
Non-interest expense:
Salaries and employee benefits	2,303		2,210		7,108		6,684
Occupancy expense	966		905		2,795		2,693
Data processing	32		33		101		126
Professional fees	452		316		959		1,136
Regulatory assessments	228		334		700		1,032
Director fees	59		58		176		175
Amortization of intangibles	—		47		62		140
Correspondent bank service charges	30		72		89		229
(Gain) loss on California tax credit partnership	(62)		86		(15)		151
Net cost (gain) on operation of OREO	116		182		480		(1,036)
Other non-interest expense	493		711		1,700		1,851
Total non-interest expense	4,617		4,954		14,155		13,181
Income before income tax provision	2,784		3,036		7,589		7,006
Provision for income taxes	1,081		1,184		2,930		2,683
Net Income	$	1,703	$	1,852	$	4,659	$	4,323



United Security Bancshares
Selected Financial Data (unaudited)
(dollars in thousands, except per share amounts)
	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014	2013
Basic earnings per share	$0.11			$0.12			$0.31	$0.28
Diluted earnings per share	$0.11			$0.12			$0.31	$0.28
Weighted average basic shares for EPS	15,262,501			15,248,221			15,253,192	15,245,874
Weighted average diluted shares for EPS	15,267,808			15,248,426			15,260,748	15,247,149

Annualized return on:
Average assets	1.00%			1.14%			0.94%	0.90%
Average equity	8.39%			10.14%			7.90%	8.10%
Yield on interest-earning assets	4.34%			4.10%			4.24%	4.21%
Cost of interest-bearing liabilities	0.39%			0.42%			0.38%	0.49%
Net interest margin	4.11%			3.84%			4.01%	3.90%
Annualized net charge-offs (recoveries) to average loans	(0.02)%			(0.55)%			(0.07)%	0.04%


	September 30, 2014			December 31, 2013
Shares outstanding - period end	15,272,382			14,799,888
Book value per share		$5.32			$5.17
Tangible book value per share		$5.03			$4.86
Efficiency ratio	62.90		%	70.47		%
Total nonperforming assets		$28,611			$32,048
Nonperforming assets to total assets	4.14		%	5.04		%
Total impaired loans		$14,369			$18,132
Total nonaccrual loans		$9,755			$12,341
Allowance for credit losses to total loans	2.48		%	2.78		%